Risk Management, Tips, Trading Education

Minimizing Trading Risk and Learning Through Experience.

Risk reward - day trading 101 - 5 steps

Helpful Advice for Any Trader

Trading can be a difficult profession to get into. Traders battle fear, uncertainty, and volatility on the daily and the competitive nature and financial insecurity of trading are some huge potential turnoffs for people wanting to get involved in the market. However, if you know how to play the game correctly you stand a chance to earn huge rewards on your investments and exponentially increase your capital faster than many other professions.

The potential rewards that come with trading attract all sorts of individuals into the market. Some are more prepared than others while others prefer to take risker positions rather than simply play it safe, but what all investors in the market share is that they want to make money. Two pieces of advice I could give any trader involved in the stock exchange are to first get comfortable with not being right all the time and to learn to manage their risk to minimize losses.

Learning From Your Wins and Losses

As traders, we must get comfortable with the fact that not all our trades are going to play out as we predicted. In life winning is easy and the same applies to trading. After a successful trade we are typically filled with joy and delight. Furthermore, even when we get lucky in a trade situation where we may have taken an uncalculated risk or simply just went into the trade with no plan, we still feel the same joy of winning since profits increased after the trade was over. On the other hand, losing is tough and can be hard to bounce back from.

Even if we train, practice, and work extremely hard to be profitable in a trade we still may lose money which can lead to a drop in self-confidence and increased fear and uncertainty in our decisions. In the sport of trading there are both winners and losers. The best traders understand not to view trades through the narrow lens of success or defeat, and most importantly they learn from their mistakes. Rather than get hung up on a losing trade, they focus on why a trade played out the way it did to assess where they went wrong in their decision making.

Coming to understand where a problem took place is key to growing as a trader because you will learn how to preemptively stop a mistake from happening and prevent yourself from making the same blunder in the future. The same mentally can be applied to successful trades as well. If we as traders begin to celebrate a win and purely focus on the outcome of our trade decisions, we will fail to identify the steps we took to become successful and won’t grow as traders. By flipping our perspective to not focus on what occurred and instead focus on the how and why something happened, we as traders can learn to grow from our wins and losses in the market and reach new profit goals within the industry.

Risk Management

Another important aspect of trading any trader should master is risk management. Managing the risk you take on when placing financial bets is vital to the success of any trader. A few methods traders use to minimize their risk when trading is diversification and having a clear plan prior to getting involved in any trade idea. Diversifying your portfolio as a trader gives you leverage within the market because you branch out your holdings ensuring you aren’t reliant on the success of a particular commodity or stock.

Furthermore, you decrease your financial risk through putting your money in various trades since you won’t have to worry about losing all your wealth in one trade. In addition, diversifying your portfolio also gives you as a trader a greater probability of success by giving yourself more opportunities to win. On top of spreading your wealth, another great method to minimize your financial risk in the volatile market is to have a clear plan of action when getting involved with any trade. To have a plan you must set a clear entry point and stopping point, so you know when you want to enter and exit a particular trade. Furthermore, you need to do your own mental preparation and back testing to ensure you are prepared when getting involved in a trade.

A technique to help you stick to your trading plan is to automate your trades. This will help you stick to your decisions and not let your emotional swings or feelings influence your trade decisions.

Growth in the Industry

Two important facts to understand prior to getting involved in the trading industry are that you must be able to learn through experience and manage your risk. As traders, we need to not only learn from our success and understand how we made money in a trade but also learn from our losses so we can grow from our mistakes and become a better, smarter trader through the errors we make. Additionally, we need to understand the value of diversifying our portfolios and having a clear plan of action when going into a trade to minimize our financial risk as traders.


To grow and become the best trader you can be, it is crucial that you remember two key facts prior to entering the competitive game of trading. The first is that you must be able to learn from your successes and failures as a trader. Identifying why you lost or won money in a particular trade situation will help you to grow as a trader and learn how to preemptively stop mistakes in the future.

Secondly, it is critical that you learn techniques to minimize your financial risk like diversification and effective planning so you can maximize gains while minimizing your losses.  

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